Customer loyalty programs: How to set up best loyalty programs 2021
Customer loyalty programs: How to set up best loyalty programs 2021
The importance of customer loyalty can’t be underestimated. It is customer loyalty that drives repeat business and keeps acquisition costs low, and it can even increase average order value, with existing customers likely to spend 31 per cent more than new ones.
And there are myriad ways to encourage repeat business; from excellent customer service to loyalty marketing. Customer loyalty programs remain a popular form of retention marketing and can range from the simple – such as classic coffee stamp cards – to the sophisticated, like exclusive VIP lists.
But not all customer loyalty programs are equal – and, if mismanaged, rewards programs can end up costing your business rather than growing it.
What is a customer loyalty program?
Customer loyalty is what motivates your customers to choose your brand over the competition – a customer loyalty programs should incentivise that sense of loyalty by rewarding customers for shopping with you.
Why implement a customer loyalty programs? Because they work. Studies show that loyalty programs increase spending, plus:
Customer loyalty programs decrease your cost of sale: Acquiring a new customer can cost five times more than retaining an existing customer.
Customer loyalty is infectious: Research shows that 70 per cent of happy, satisfied customers who’ve had a positive experience will spread the word about your business by recommending you to others. Those people, in turn, are 83 per cent more likely to listen to a referral than any other form of marketing. Reportedly, referrals generate two times the sales of paid advertising.
Customer loyalty programs double as marketing research: If designed and implemented correctly, customer loyalty programs can provide valuable insights into your customers.
Thanks to increasingly sophisticated digital marketing software, businesses can now track and discover customer buying habits along with what incentivises them most (and least). This data can be used to improve your customer loyalty programs and inform your wider marketing strategy.
How to set up a loyalty program
To create a truly successful customer loyalty program, it’s important to understand who your customers are and what motivates them.
Examining data around what your customers buy, how much they spend, how satisfied they are with your company, how much profit you make from their purchases, and what other products or services they buy is an important place to start. If your business doesn’t have such data readily available, there are various ways to get to know your customers. These include:
Social media: Social media is an incredible resource for candid customer opinions and market research. Consider using surveys or polls on platforms such as LinkedIn, Facebook and Instagram to find out more about your customers and what motivates them.
Tracking customer behaviour: Customer relationship management software or even raw purchase data can help you understand your customer and which types of rewards might motivate them.
Email lists: Monitoring click-through rates and bounce rates will deliver insights into what interests your customers (and what switches them off).
1. Determine your loyalty program points approach
Customer loyalty programs come in all shapes and sizes, but studies show that 90 per cent of brands fall into three categories. These include:
Points-based loyalty programs where customers receive points for every dollar they spend.
Tiered loyalty programs where shoppers are segmented into different tiers according to how much they spend
Value loyalty programs where shoppers can ‘earn’ points and distribute them to a charity of their choice.
Mission-driven programs which are customer loyalty programs for organisations with a strong social mission, such as Ben & Jerry’s, which donates a percentage of profits to social causes.
Game-based programs which employ gamify the purchase of a product or service to encourage repeat spending, such as McDonald’s Monopoly game.
Subscription programs, which are loyalty incentives that reward subscribed customers, like Amazon Prime’s First Reads programme.
Referral programs, which are growth-driven strategies that reward customers for attracting new buyers with referrals, such as HelloFresh.
Many brands utilise a combination of loyalty programs, but it’s important not to overcomplicate your strategy.
Next, you need to identify the rewards offered to your customers. For example:
Product-based loyalty approach
Coffee stamp cards are an example of a product-based customer loyalty system, where customers receive a free item once they’ve bought a product a certain number of times. For example, customers might receive a free coffee once they’ve bought five coffees.
Points towards products
Under a points system, shoppers receive points in return for spending – these points can be used to redeem products.
Points towards cashback
Under this points system, shoppers receive points in return for spending, but the points provide a discount when they next spend.
2. Choose your loyalty program software
Once you’ve determined what your customer loyalty program is trying to achieve and which model you’ll use, it’s time to decide which software is best to bring it to life. There are a number of different platforms available, depending on your budget and objectives. They include, but aren’t limited to:
Yotpo:
Built specifically for e-commerce businesses, Yotpo is a cloud-based customer loyalty platform that offers highly customisable loyalty programmes. Whether you’re designing a referral, tier-based, points system or more, Yotpo offers multiple campaign choices and a variety of pricing options.
Best for: e-commerce businesses from start-up to enterprise
Price: $20 to $201/month
Smile.io:
With programmes designed to suit any business phase from start-ups right through to established businesses looking to scale, Smile.io is one of the most popular customer loyalty software platforms. It offers three rewards programmes including points, referral and VIP, which can be run individually, in pairs or all together.
Best for: small businesses
Price: $66, $269 or $810/month
Referrizer:
This software boosts retention by identifying your most loyal customers and using a points-based program to reward them for every repeat purchase. It also rewards customers every time they recommend your business to someone they know.
Best for: local businesses
Price: Free option ranging to $404 or $539/month
Guusto:
A favourite for small businesses on a budget, Guusto is a free rewards and incentives platform that provides solutions for both customers and employees.
Best for: small businesses
Price: Free option ranging from $2/member to $3.40/member/month
Candybar:
A modern spin on the coffee stamp classic, Candybar has digitised the punch card loyalty programme. The software allows customers to input their mobile number in order to receive a digital ‘stamp’ each time they make a purchase. Business owners can also use the program to contact loyal customers.
Best for: a range of businesses
3. Decide on physical customer loyalty cards vs digital loyalty apps
Brands are increasingly turning to digital loyalty apps instead of (or as well as) physical loyalty cards. For consumers, this means having to carry around fewer loyalty cards and not worrying about forgetting their card if they indulge in some impulse shopping.
Tips for success
- Do your research:
A common mistake many marketers make is not doing enough customer research before implementing a loyalty program. It’s easy to underestimate the importance of this step, but if you don’t know what your business actually needs or what your customers want, your loyalty program will never fulfil its potential.
- Make it personal:
Personalisation is an increasingly important part of every step of the customer journey, including customer loyalty. Making personalised recommendations for loyal customers, sending exclusive offers or birthday discounts all help to create an emotional connection and fortify brand loyalty.
- Keep it simple:
While it may be tempting to add endless incentives and rewards to your customer loyalty programme, the most simple strategies are often the most effective. Your customers don’t want to jump through hoops to be rewarded – confuse and you’ll lose.
- Test, test and test again:
Before setting the go-live date, ensure you’ve allocated enough time to test the functionality of your program. Between different software programs and smartphone and desktop proficiency, there are plenty of opportunities for things to slip through the cracks, and mismanaging customer loyalty data can be extremely damaging. Once you’re up and running, it’s equally important to test if your program is working by assessing your purchase rate or even requesting a satisfaction survey.
- Don’t forget omnichannel:
If your business spans both in-store retail and e‑commerce, it’s worth ensuring that your loyalty program offers a ‘single view’ of your customer, so that they can use the program and collect rewards both in-store and online.
What makes a successful rewards program? We asked brands that know.
They’re designed to reward customers for spending more, and to convince shoppers to keep coming back. But what makes a successful customer loyalty program? And should you create one?
Sans Drinks: The Non-Alcoholic Drinks Superstore
Australia’s Sans Drinks is one of the country’s first non-alcoholic bottle shops, offering high-quality, low-impact products.
The brand is not only dedicated to delivering delicious drinks but to creating the best customer experience for its customers. The Sans+ loyalty program plays a big part in this, says founder Irene Falcone.
The loyalty program: “Our loyalty program, Sans+, was set up to help customers who are taking a break from alcohol discover the alcohol-free drinks they love. We want to hold their hand as they find great alternatives to [alcoholic] drinks they love and incentivise them to keep coming back.
“Sans+ is very simple. Customers earn points when they shop with us and bonus points for writing reviews and referring friends. Points can easily be redeemed as discounts at the checkout.”
Why it works: Sans+ keeps its messaging simple and easy to understand: ‘Earn points on every order to spend on more drinks’. For both new and returning customers, the rewards for spending with Sans Drinks are clear and easy to redeem.
The brand is currently using a customised app to deliver its loyalty program but is investigating ways to expand and offer their customers more rewards.
What they learned: Falcone says: “If you want customers to embrace the loyalty program it has to be simple and easy to use. Think about what the customer wants and finds valuable and put that at the core of the program. Sans+ is all about discovery – the discovery of new alcohol-free drinks.”
Bondi Sands: Self-Tan, Suncare and Skincare
Bondi Sands is experiencing rapid growth in the US market, and customer loyalty is a key factor in their expansion explains global digital marketing manager Emma Quirk.
The loyalty program: “Bondi Babe Rewards is a fully integrated loyalty program that runs on our e-commerce site and is connected to our CRM network, social channels and review platform.”
She explains that customers earn points from the moment they create their Bondi Babe Rewards account. From there, they earn one point per dollar for online purchases and in-store purchases (by uploading their receipt to their rewards account), as well as leaving reviews, adding photos to their reviews, or following the brand on social media.
Customers can then use points to redeem Bondi Sands vouchers ($10, $20, $30 and $40) or by ‘shopping’ certain products available within Bondi Sands’ rewards product catalogue.
“Our program aims to provide flexibility for customer reward behaviour, giving options on how they would like to spend their points. Based on customers’ spend, Bondi Babe Rewards also offers tiered benefits, including birthday gifts and rewards, member-only sales, priority access to trial new products before they hit the market, and priority access to member-only events”, Quirk adds.
Why it works: The Bondi Sands team took a customer-first approach to their program and conducted substantial research. Quirk notes that: “When planning Bondi Babe Rewards, having our customer at the forefront of our loyalty program was of the utmost importance to us. We surveyed a group of our VIP customers, asking questions on what type of loyalty programs they were currently using, what they liked, what they didn’t like and what they value most from [other] programs. This [information] became the bones of our program’s structure.
“Once we heard from our customers, we began to set our key objectives: the three R’s and three C’s,” which relate to retention, recruitment, rewards; conversation, capture (data) and community.
The brand chose to work with Yotpo, their ratings and reviews partner, for optimal integration.
What they learned: “It has never been more evident that personalisation is key. That one-to-one relationship building is so important to a growing business – and can help grow it further.
“I would advise other businesses looking to set up their own loyalty program to take their time, to understand their first-party data and their customers before jumping feet-first into loyalty. We spent quite a deal of time making sure that our objectives and KPIs were sound. We ran financial modelling to ensure our loyalty program would be profitable to run, and spent time making three-year projections to show the positive impact it will have on the business.”
Country Road rewards program
With a membership that stretches into the millions, it’s fair to say that fashion and homeware retailer Country Road offers one of Australia’s largest and most successful loyalty programs.
The loyalty program: Country Road’s digital manager, Paul Conti, says that 70-80 per cent of total sales are derived from rewards program members “making the rewards program one of our most valuable assets”.
“We spend a lot of time thinking about how to improve recognition, service, access and experience for rewards members.”
Conti says that all metrics that relate to the loyalty program – from tier movement to member value – are constantly tracked, so Country Road can monitor the success of the program.
“We also track brand equity every quarter, so we can keep an eye on how our members feel about the brand and the rewards program.”
How it works: Customers earn points every time they shop, and are then categorised into five tiers – member, bronze, silver, VIP gold and VIP platinum – depending on how much they spend every year. Each tier unlocks more benefits. In addition, Country Road offers ‘Spend & Earn’ vouchers every time customers spend $100 or more in one day, access to Spend and Save sales, and rewards for their birthday, for example.
Why it works: One of the secrets to the success of Country Road’s Australian rewards program? A single view. Customers earn points whether they spend in stores or online, and Conti says this ‘single view’ has been critical to the program’s success.
“A single view of a customer is incredibly important. We know from our research that up to 70 per cent of Country Road shopping journeys include both an in-store and online touchpoint.
"We don’t have ‘in-store customers’ and ‘online customers’. Our members typically use both to discover, research and shop our collections, and our rewards program reflects that.
“A single view of a customer is incredibly important."
“The main benefit is that our members are rewarded for every shop, irrespective of the point of purchase.”
Exclusivity is another important factor, says Conti, with rewards members offered special benefits like Spend & Save, as well as invitations to in-store and partner events as well as elevated service both in-store and online.
As a result of the rewards program, Country Road has been able to offer more targeted discounting and reduce overall reliance on public promotions, says Conti. “We don’t plan to offer a single public storewide promotion this calendar year, outside of Black Friday,” says Conti.
Country Road closely tracks all transaction metrics – from acquisition to churn, win-back, member value and tier movements – in its monitoring of the rewards program, which is overseen by staff across the business.
Considering a rewards program?
Conti says that offering a single view of your customer should be the number one priority. “You need to know who they are, and what they’re doing, so nail that first.
“Then it’s about working out what loyalty means for your business, and what your customers want from you. If you can offer them real value through recognition, service, access and/or experience, then I think you’re on the right path.”
Nourished Life Rewards Club
As one of Australia's first natural skincare and beauty e-tailers, Nourished Life was also one of the first rewards programs for environmentally conscious online shoppers.
The loyalty program: Today, the program has 326,000 members, and one of its key objectives is to make earning points fun and form an emotional connection with customers.
How it works: Customers earn points as they shop, with up to 5 points per $1 spent – and 100 points equating to a $1 Nourished Life voucher.
Shoppers are divided into three tiers – bronze, silver and platinum – and customers can earn more points by referring a friend or leaving reviews for products they’ve bought.
As well as financial rewards, Nourished Life club members can also earn gifts and experiences. “It’s not just a discounting program,” says Lani Barmakov, Nourished Life’s e-commerce director. “Instead, there’s a big focus on enticing rewards as you level up – from birthday and anniversary gifts to exclusive access to offers, naturopath consultations and gift hampers.”
“It’s not just a discounting program. Instead, there’s a big focus on enticing rewards.”
Why it works: Nourished Life’s loyalty program is fully integrated into its marketing technology, with members’ information synced across all of its platforms, from its customer relationship marketing (CRM) tool to its support desk and email service provider (ESP).
This offers both personalisation and opportunities for segmentation, says Barmakov. “As we learn more about our customers and think beyond transactions, we can personalise their user experiences – and their rewards – according to individual interests and personal journeys, creating a sense of community and connection with the brand.”
Shoppers are encouraged to sign up to Nourished Life’s rewards program in a range of ways – from on-site pop-ups and prominent sign-up modules to paid social media advertising.
Incentives, such as competitions, discount codes and free gifts with purchase, are also employed to convince customers to sign up.
Considering a rewards program?
Barmakov recommends thoroughly researching your customer to determine which rewards they value most. Next, come up with a rewards program that stands out “by choosing unique rewards or elements of gamification”.
Want more loyalty program inspiration?
Check out these program from top retailers:
Sephora
Sephora’s rewards Beauty Pass rewards program is known as one of the best in the business – and for good reason. Members earn points for every dollar they spend, and these can be redeemed in Sephora’s ‘Rewards Boutique’ where customers can select from a range of deluxe beauty samples. Members can earn extra points by writing product reviews and filling out a beauty profile.
Priceline Sister Club
One of Australia’s most established loyalty programs, Priceline’s Sister Club allows members to earn points as they spend, and rewards them with free twice-annual beauty boxes. Sister Club members can also score discounts at affiliated brands, while members in the top tier receive exclusive gifts.
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